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The future of insurance is collaboration

To the outside observer the insurance industry may look very conservative with dominant global companies and local players operating in the way they have done for years and with very little interaction with their customers.

You might call them the archetypal analogue companies and this situation attracts disruptors, whether they are the digital giants such as Google or challengers like a P2P insurer, Lemonade.

It’s not surprising that KPMG’s “The Pulse of FinTech” sees insurtech as a “hot spot” for investment and the mainstream insurers are responding.

In AXA’s case we want to adapt our business model from payer to partner. This means accelerating business innovation to meet our customers’ rapidly evolving needs in the digital world.

In 2014, AXA set up its venture capital arm – AXA Strategic Ventures – as a venture capital fund and part of its innovation ecosystem. However, according to a recent survey by Willis Towers Watson of 200 senior-level executives within the insurance industry almost three quarters of them believed their sector had failed to show leadership in digital innovation but nearly half thought the solution was acquisition.

I would suggest that investment, collaboration and the sharing of knowledge could be more fruitful for both growth companies who are pioneering new approaches and the traditional players.

The insurance industry model is based on three core elements: capital; data and distribution. Capital is now readily available to those wishing to start a business through a number of avenues and this is not likely to change in the foreseeable future. As insurers, we have vast amounts of data available to us. The challenge is to now work out how to use this data and make it work harder to improve how we service our customers.

The last element is distribution, where, arguably, technology can play the most significant role as customers look for new points of access. There has been a shift away from online to being able to access services through mobile while on the move. The insurance industry needs to recognise this fundamental change.

We don’t have a crystal ball and we can’t predict the future of insurance. What we can do is look at trends over recent months and years to give us an indication of the direction the market is moving. Change can be sudden and to remain relevant, insurers need to review these new innovations and select the ones that give them the most options.

The most promising technologies are those that have the potential to change our approach or simplify the customers’ experience. For example, by creating technology using artificial intelligence (AI) which allows a customer to take photographs to begin the claims process without having to send someone out to a property improves efficiency and the overall process for the customer.

We have seen a number of innovations such as this at AXA Strategic Ventures. A firm within our fund has created a device and app which turns a smartphone into an alcohol breath tester while another provides patients with methods to manage their chronic health conditions, such as reminders to take pills or to exercise. The added benefit to us as an insurer here is that we gain significant insight into patient behaviour and the improved health of our customers reduces costs.

AI will, most certainly, be used more and more both in insurance and the wider financial services market. Over the next few years, we are likely to see the first application of virtual advisers or virtual agents for insurance. These chat bots would be able to communicate at a level so advanced that it would be difficult to distinguish between it and a human, allowing for greater accuracy for customers.

The demand for such technologies is not just limited to Europe and the US. New hubs of innovation are springing up around the world and customers in these regions are demanding equally innovative solutions.

While the potential is vast, technology has also created challenges for businesses. With the increasing prevalence of cybercrime, no organisation can 100% protect themselves from an attack with malicious intent. It is no longer a question of if an attack will happen but rather when. The costs associated with cyberattacks are significant and organisations are beginning to understand the risk. The need for cyber insurance is now widely accepted as a necessity for many businesses to protect themselves from such an eventuality.

Start-ups and new technologies will continue to have a growing influence on the insurance industry. But rather than being seen as a threat, insurers should see the innovators as an opportunity. These businesses have seen a niche in the market and by working with them, established insurers can gain greater understanding of their customers and provide more innovative solutions. These businesses are not likely to be able to provide the full value chain so collaboration is mutually beneficial. The entry of these disruptors into the market has challenged insurers to innovate and equip themselves for the next phase in the future of insurance.

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